Microsoft Office Tutorials and References
In Depth Information
IRR
Figure 6.20
Use IPMT to determine
the interest payment for
a period of time based
on an investment with
periodic constant
payments and a
constant interest rate.
A
The function
built with cell
referencing
IRR IRR returns the internal rate of return for a series of cash flows represented by numbers in
the form of values.
=IRR(values,irr,guess)
The IRR function is used to determine the internal rate of return for a series of cashflows. The
cashflows can var y and do not have to be equal, however, they must occur at equal inter vals.
See also, NPV . Figure 6.21 shows that the investment in the business is $100,000. The series of
cash flows you expect to receive within the next five years, or return on investment is $20,000,
$30,000, $35,000, $40,000, and $45,000. Based on the 5-year cash return, the ROI is 18%. The
ROI after 3 years is –7%. The breakeven point falls between years 3 and 4.
The values must contain one positive and one negative value to calculate the
internal rate of return.
VALUES
The order of cash flows is determined by the order of values, so be sure to
enter your payment and income values in the proper sequence.
IRR
This is the number you guess is close to the IRR .
GUESS
Figure 6.21
IRR generates the
internal rate of return
for cash flows in a
series represented by
numbers in the form of
values.
A
The function
built with cell
referencing
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